The purpose of the act is to enhance protections against fraud in the
offering of financial assistance for college education. It does so by
three measures:

increasing the penalties for people who perpetrate scholarship scams,

eliminating a loophole in bankruptcy law that allowed the scam artists
to retain their ill-gotten gains by exploiting the homestead
exemption, and

requiring the US Department of Education, in cooperation
with the Federal Trade Commission, to publish information about
scholarship scams on its web site.

The increased penalties for people convicted of scholarship fraud
include jail time and fines of up to $500,000. Previously, the Federal
Trade Commission was limited to shutting down the company and seeking
restitution for defrauded consumers. This should serve as an
additional deterrent to perpetrators of scholarship fraud, and should
increase the number of cases filed against scholarship scams.

The full text of the act appears below. A
PDF version is also
available.

AN ACT
To enhance protections against fraud in the offering of
financial assistance for college education, and for other
purposes.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `College Scholarship Fraud
Prevention Act of 2000'.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) A substantial amount of fraud occurs in the offering
of college education financial assistance services
to consumers.
(2) Such fraud includes the following:
(A) Misrepresentations regarding the provision of
sources from which consumers may obtain financial
assistance (including scholarships, grants, loans,
tuition, awards, and other assistance) for
purposes of financing a college education.
(B) Misrepresentations regarding the provision of portfolios of
such assistance tailored to the needs of specific consumers.
(C) Misrepresentations regarding the pre-selection of students
as eligible to receive such assistance.
(D) Misrepresentations that such assistance will be provided to
consumers who purchase specified services from specified
entities.
(E) Misrepresentations regarding the business relationships
between particular entities and entities that award or may
award such assistance.
(F) Misrepresentations regarding refunds of processing fees
if consumers are not provided specified amounts of such
assistance, and other misrepresentations regarding refunds.
(3) In 1996, the Federal Trade Commission launched `Project
Scholarscam', a joint law enforcement and consumer education campaign
directed at fraudulent purveyors of so-called `scholarship services'.
(4) Despite the efforts of the Federal Trade Commission, colleges and
universities, and nongovernmental organizations, the continued lack of
awareness about scholarship fraud permits a significant amount of
fraudulent activity to occur.
SEC. 3. SENTENCING ENHANCEMENT FOR HIGHER EDUCATION
FINANCIAL ASSISTANCE FRAUD.
Pursuant to its authority under section 994(p) of title 28, United
States Code, the United States Sentencing Commission shall amend
the Federal sentencing guidelines in order to provide for enhanced
penalties for any offense involving fraud or misrepresentation in
connection with the obtaining or providing of, or the furnishing of
information to a consumer on, any scholarship, grant, loan, tuition,
discount, award, or other financial assistance for purposes of
financing an education at an institution of higher education, such
that those penalties are comparable to the base offense level for
misrepresentation that the defendant was acting on behalf of a
charitable, educational, religious, or political organization, or a
government agency.
SEC. 4. EXCLUSION OF DEBTS RELATING TO COLLEGE FINANCIAL
ASSISTANCE SERVICES FRAUD FROM PERMISSIBLE EXEMPTIONS OF
PROPERTY FROM ESTATES IN BANKRUPTCY.
Section 522(c) of title 11, United States Code, is amended--
(1) by striking `or' at the end of paragraph (2);
(2) by striking the period at the end of paragraph (3) and
inserting `; or'; and
(3) by adding at the end the following:
"(4) a debt in connection with fraud in the obtaining or
providing of any scholarship, grant, loan, tuition,
discount, award, or other financial assistance for
purposes of financing an education at an institution
of higher education (as that term is defined in
section 101 of the Higher Education Act of 1965
(20 U.S.C. 1001)).".
SEC. 5. SCHOLARSHIP FRAUD ASSESSMENT AND AWARENESS ACTIVITIES.
(a) ANNUAL REPORT ON SCHOLARSHIP FRAUD-
(1) REQUIREMENT- The Attorney General and the Secretary of
Education, in conjunction with the Federal Trade Commission,
shall jointly submit to Congress each year a report on fraud
in the offering of financial assistance for purposes of
financing an education at an institution of higher education.
Each report shall contain an assessment of the nature and
quantity of incidents of such fraud during the one-year period
ending on the date of such report.
(2) INITIAL REPORT- The first report under paragraph (1) shall be
submitted not later than 18 months after the date of the
enactment of this Act.
(b) NATIONAL AWARENESS ACTIVITIES- The Secretary of Education
shall, in conjunction with the Federal Trade Commission,
maintain a scholarship fraud awareness site on the
Internet web site of the Department of Education. The
scholarship fraud awareness site may include the following:
(1) Appropriate materials from the Project Scholarscam
awareness campaign of the Commission, including
examples of common fraudulent schemes.
(2) A list of companies and individuals who have been
convicted of scholarship fraud in Federal or State court.
(3) An Internet-based message board to provide a forum for
public complaints and experiences with scholarship fraud.
(4) An electronic comment form for individuals who have
experienced scholarship fraud or have questions about
scholarship fraud, with appropriate mechanisms for the
transfer of comments received through such forms to the
Department and the Commission.
(5) Internet links to other sources of information on
scholarship fraud, including Internet web sites of
appropriate nongovernmental organizations, colleges
and universities, and government agencies.
(6) An Internet link to the Better Business Bureau in
order to assist individuals in assessing the business
practices of other persons and entities.
(7) Information on means of communicating with the Federal
Student Aid Information Center, including telephone
and Internet contact information.
Passed the Senate November 4, 1999.
Passed the House September 25, 2000.
Signed by the President November 1, 2000.
Became Public Law No: 106-420.